Answered: If X has many close substitutes, there…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 3CQ: Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates...

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If X has many close substitutes, there will be large substitution effects (what will the
indifference curves look like?).

-The demand curve is likely to be flat, with a small increase in price leading to a large decrease in demand.
For a normal good, the IE reinforces the SE, causing demand to be flatter.

-For an inferior
good, the IE dampens the SE, leading to a steeper demand curve.

Can someone graph the Demand curve for a normal good and an inferior I'm having a hard time visualizing this. Thanks

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